HOW TO ANSWER OFFER & ACCEPTANCE QUESTIONS

Introduction

The question focuses on the law of offer and acceptance and whether a binding
contract was made.

Define Contract

A contract is a binding agreement where there must be an offer, acceptance,

consideration, intention and capacity.

State the issues: -

1) Whether Offer was made

a. Define Offer – an expression of willingness to enter a contract. An

offer may be made to a specific person (bilateral offer) or to a group of
persons or to the world at large (unilateral offer).

Gibson v Manchester City Council (1979) HL

The plaintiff wanted to buy House from the defendant. The D wrote to him stating
that it “may be prepared to sell the house” and inviting him to make a “formal
application to buy” on the enclosed application form. Four (4) months later the D
informed the plaintiff that it was not prepared to sell him the house. The plaintiff
claimed that the D’s first letter was an offer which he had accepted when he
submitted the application form and so there was a binding contract. The House of
Lords held that there was no binding contract. The words used made it quite
impossible to construe the D’s letter to the plaintiff as a contractual offer.

Centrovincial Estates (1983) plc v Merchant Investors Assurance Company

Ltd. (1983) CA

When an offer has been made in clear terms and has been accepted the offeror
cannot simply seek to withdraw the offer.

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 b. Offer must be distinguished from Invitation to treat (ITT); supply of
information or statement of intention.

(i) An Invitation to Treat (ITT) is an indication of a willingness to conduct

business. It is an invitation to make an offer or to commence
negotiations.

e.g.’s of ITT - Goods on display in a shop or self-service store – Fisher v Bell

Fisher v Bell (1961)

The display of goods in a shop window is an invitation to treat only; it is the

customer who enters the shop and makes an offer to purchase an item.
Where the display is made by a machine then such a display will be deemed an
offer.

Thornton v Shoe Lane Parking Limited (1971)

The court felt that where a display is made by a machine the display will be
deemed an offer. Lord Denning stated that an automatic machine which issues
tickets would be making a standing offer, which is accepted by the person making
the representation.

Advertisements are generally ITT

Partridge v Crittenden (1968) CA

They held that the advertisement was an invitation to treat and not an offer.

However, an advertisement may be seen as a unilateral offer which can be accepted

upon performance or completion of the act.

Carlill v Carbolic Smoke Ball Co. (1893) HL

The company offered by advertisement to pay $100 to any person who succeeded
in catching influenza after having used a smoke ball three (3) times a day for two
(2) weeks in the prescribed manner.

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Mrs. ‘C’ bought and used a ball in the prescribed manner, succeeded in catching
influenza afterwards and sued for her $100.

(ii) The supply of information is not an offer since it does not clearly
show an expression of willingness to enter a contract by the offeror.

A supply of information is not an offer as it does not clearly state that the offeror
intends to be bound.

Harvey v Facey (1893)

Where the Privy Council held that there was no contract. The second telegram
was not an offer but merely an indication of the minimum price the defendants
would require if they eventually decided to sell.

(iii) A Statement of intention is not an offer -

If one party states that he intends to do something this is not an offer, since he is
not stating that he will do it.

Harris v Nickerson (1873)

The defendant advertised in the newspapers that certain items were to be sold by
him over a period of three (3) days. On the third (3rd) day the plaintiff visited the
auction with the intention of purchasing some listed items but was informed that
those items were withdrawn from the sale.

Court held that the auctioneer’s advertisement was a statement that he intended to
sell certain items; it was not an offer that he would sell the items.

Note that you would not be required to discuss all those situations that are not
offers, only the ones based on the facts of the question.

An offer must be communicated before it can be accepted; however, there is an

exception to this rule relative to a unilateral offer. Note the cases of Procter and
Clarke.

Note that for a person to accept an offer, he must be aware of it – Gibbons v

Procter; R v Clarke

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Gibbons v Procter

On 29th May the defendant offered a $25.00 reward to the person who gave
information to a certain superintendent of police, leading to the conviction of the
perpetrator of a certain crime.

The information reached the superintendent after an advertisement of the offer was
distributed to the police station but before the P was aware of the offer. The issue
was whether or not the plaintiff could claim the reward. Court held that the
plaintiff was allowed to claim the reward, even though he was unaware of the offer
when he passed on the information to his fellow officer.

R v Clarke

Where the court held that unless a person performs the condition of the offer acting
on the faith of or in reliance of the offer then there is no acceptance of the offer and
therefore no contract between the parties.

Williams v Carwardine (1833)

Where claimant knew of the offer but thinking that she did not have long to live
gave the information ‘to ease her conscience in hopes of forgiveness thereafter’.

The claimant was entitled to her reward and her motive was irrelevant provided
that she was aware of the offer at the time of acceptance.

Acceptance occurs when the offeree’s words or conduct give rise to the objective
interference that the offeree assents to the offeror’s terms.

Day Morris Associates v Voyce (2003)

Court held that a contractual acceptance had to be a final and unqualified

expression of assent to the terms of the offer. Conduct will only amount to an
acceptance if it is clear that the offeree did the act in question with the intention
objectively assessed of accepting the offer.

After stating the law on offer, look at the facts of the question and state who
made the offer.

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You have to say who made the offer before stating the law on acceptance.

2) Having stated that X made the offer, was there acceptance?

Define Acceptance

- Must be in keeping with terms of offer and the offeree must have knowledge
of the offer at the moment of acceptance. The acceptance must be
unqualified absolute and unconditional. Acceptance can be by word or by
conduct.

(i) Consider whether a counter-offer was made

Hyde v Wrench (1840)

The defendant offered to sell his property to the claimant for $1000. The claimant
offered $950 which the defendant rejected. The claimant then purported to accept
the original $1000 offer.

The claimant’s $950 counter-offer destroyed the original offer, which therefore
was no longer in existence when the claimant purported to accept it at a later date.

A mere request for information not amounting to a counter-offer will not destroy
the original offer. Thus where the offeree queries the offer and seeks more
information, this is neither an acceptance nor a rejection and the original offer
stands.

Stevenson v McLean (1880)

Where court held that the telegram was a mere request for information and not a
counter-offer.

(ii) Consider whether offer has been terminated

An offer may be terminated at any time, before acceptance. Consider whether

issues of Revocation are present:-

Revocation is ineffective until communicated to the offeree and before acceptance

of the offer.
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Byrne & Co. v Van Tienhoven & Co. (1880)

Where Due to the postal acceptance rule (a letter of acceptance is effective upon
posting) a contract came into existence before revocation had been made.

If the offeror promises not to revoke the offer before a specified date any such
promise is unenforceable unless supported by consideration [(i.e.) the other party
must have also promised or have given up something of value in return].

Routledge v Grant (1828)

The defendant offered to take a lease of the claimant’s premises, and promised to
keep the offer open for six (6) weeks. After three (3) weeks the defendant
purported to revoke his offer, while at the end of the six (6) weeks the claimant
purported to accept it. There was no contract as P provided no consideration for
C’s promise to keep offer open for the 6 weeks.

The communication of revocation need not necessarily be by the offeror.

Communication to the offeree through a reliable source is sufficient.

Dickenson v Dodds (1876)

The Court of Appeal held that the manner of communication was irrelevant
provided that the claimant knew, without doubt, that the defendant no longer
intended to sell his property to him by the time the purported acceptance was
made.

Revocation of a unilateral offer is generally valid once there has not been
performance or completion; however, the court seems to adopt a more equitable
approach and would deem the act of the offeror unfair if he seeks to revoke
knowing that the offeree has almost completed the act.

Daulia Ltd v For Millbank Nominees Ltd (1978),

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It was stated that the offeror cannot withdraw his offer once performance has
begun. However, he is not obliged to honor his promise to make the payment until
the other party has fully performed the act for which payment was promised.

(iii) Consider whether issues of Rejection/counter-offer are present:-

An express rejection or a counter-offer will destroy the original offer and a request
for information in response to an offer is neither a rejection nor a counter offer.

Note case of Hyde v Wrench

(iv) Consider whether issues of Lapse of time are present:-

Where it is expressly stated that the offer will remain open for a fixed period, the
offer cannot be accepted after the expiration of that period. If there is no time
stipulation, the offer lapses after a reasonable time. What is reasonable is a
question of fact in each case.

Ramsgate Victoria Hotel Co. Ltd. v Montefiore (1866)

The defendant applied for shares in the claimant company in early June 1864. The
shares were allotted to him in late November 1864 and the defendant refused to
pay for the shares. The defendant was not liable since the company’s response to
the defendant’s offer had not been made within a reasonable time.

State the general rule of Acceptance – There must be communication of the

acceptance i.e. the offeree must communicate his acceptance to the offeror –
Entores, Felthouse v Bentley.

Entores v Miles Far East Corporation (1955)

The contract was made when and where the acceptance was received. Thus, with
respect to instantaneous communication, the acceptance takes place at the moment
the acceptance is received by the offeror and at the place at which the offeror
happens to be.

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Felthouse v Bindley (1862)

Court held that the claimant had no right to impose silence as a means of
acceptance upon an unwilling offeree who would otherwise have to go to the time
and expense of rejecting the offer.

Note the exceptions where there can be acceptance by Silence: -

i. Silence plus an external manifestation of assent by conduct amounts to

acceptance both in bilateral and unilateral contracts.

Weatherby v Banham (1832)

Court held that there was a contract because the defendant had accepted, by
implication, by keeping and reading the periodicals.

ii. The offeror may be estopped from denying that he received an

acceptance if it is his own fault that he did not get it. The offeror may
also be estopped from denying that he received acceptance in an instance
where he has waived the requirement of communication as with
unilateral contracts – Carlill v Carbolic Smokeball.

iii. The Postal Acceptance Rule

Rule states that a letter of acceptance of an offer takes effect upon posting rather
than when it actually arrives to the offeror.

Adams v Lindsell (1818)

Court held that the contract was concluded when the letter of acceptance was
posted.

Household Fire Insurance Co. v Grant (1879)

The CA held that the contract was completed at the time of posting even though it
was never actually received by the defendant.

Three (3) qualifications for the operation of the postal acceptance rule:

1. Use of the post must be a reasonable means of acceptance

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Henthorn v Fraser (1892) CA

Where the circumstances under which an offer was made were such that it must
have been within the parties’ contemplation that the post might have been used as a
means of communicating the acceptance of it, the acceptance was complete as soon
as it was posted.

As the parties lived in different towns, an acceptance by post must have been
within their contemplation, although the offer was not made by post.

The postal acceptance rule can be excluded, by the terms of the offer. Thus, the
rule would not apply if the offeror did not intend for it to apply.

Holwell Securities Ltd v Hughes (1974)

Where there was no contract of sale as the terms of the offer, on true construction,
required acceptance to be communicated to the offeror.

2. The mail must be correctly addressed and properly posted;

If the letter of acceptance is wrongly addressed there would be no contract. The

offeror may accept the risk of delay occasioned by the post but not the carelessness
of the offeree.

LJ Korbetis v Transgrain Shipping BV (2005) – The “Alexia M

Where the reason for the loss of the letter is that it had been incorrectly addressed
by the offeree, acceptance does not take place on posting because, while the offeror
may take the risk of delay or loss in the post, he does not take the further risk of
carelessness by the offeree.

3. The postal acceptance rule applies to letters, telegrams, and tele-messages.

Rule does NOT apply to telephone acceptances or acceptances by telex which are
instantaneous communication. Faxes and e-mails are virtually instantaneous forms
of communication, and the postal acceptance rule does not apply to them.

Bruner v Moore (1903)

An acceptance by telex has no effect until it is received by the offeror.

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Entores v Miles Far East Corporation (1955)

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels GmbH [The Brinkibon

Case] (1982).

Court held that communication by telex, the acceptance is effective when it is

communicated to the offeror with the result that the contract is concluded in the
jurisdiction where the offeror is located.

Acceptance by E-Mail will be treated as instantaneous communication and be

effective when received, or within a reasonable time thereof.

What if the offer stipulates a specific method of Acceptance?

An offeror may stipulate that acceptance is to be made using a specific method.

Eliason v Henshaw (1819)

Court held that there was no acceptance of the offer because it was not done in the
manner stipulated by the offeror. No contract was formed. The offer was not
accepted within the proper time frame; offer was not accepted in the right place;
offer was not contracted by the correct manner.

The court felt that it was quite reasonable for the offeror to have dictated the terms
of the contract, and because Henshaw failed to follow the stipulated terms, there
was no contract and hence no breach.

Conclusion

Have to state whether a contract was formed i.e. you have to give advice to the
person. State what remedies may be available if there is a breach i.e damages;
specific performance; or an injunction.

Things to avoid

Writing everything you know about a topic. Focus on the question asked.
Good marks can only be achieved by properly applying the law to the question
asked.

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